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Economic and Marketing Efficiency Among Corn Ethanol Plants

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  • Sesmero, Juan P.
  • Perrin, Richard K.
  • Fulginiti, Lilyan E.

Abstract

We extend data envelopment analysis (DEA) to decompose the economic efficiency of a sample of ethanol plants into internal (technical and allocative) and boundary (marketing) sources. This decomposition allows us to evaluate the channels through which different plant characteristics affect plant performance. Results show that plants are very efficient from a technical point of view. Plants with higher production volumes seem to perform better not because of economies of scale but because they can secure more favorable prices (higher marketing efficiency) and execute production plans accordingly (higher allocative efficiency). This may rationalize the increase in the size of the average plant observed in the industry in recent years despite evidence of close to constant returns to scale. This suggests that plants may have incentives to horizontally integrate. Our results do not seem to point towards the existence of strong incentives to vertically integrate. Plants seem to have achieved significant improvements in performance through experience and learning-by-doing. Plants that are privately owned do not seem to perform better that those owned by farmers’ cooperatives.

Suggested Citation

  • Sesmero, Juan P. & Perrin, Richard K. & Fulginiti, Lilyan E., 2011. "Economic and Marketing Efficiency Among Corn Ethanol Plants," 2011 Conference (55th), February 8-11, 2011, Melbourne, Australia 100709, Australian Agricultural and Resource Economics Society.
  • Handle: RePEc:ags:aare11:100709
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    References listed on IDEAS

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    1. Enghin Atalay & Ali Horta?su & Chad Syverson, 2014. "Vertical Integration and Input Flows," American Economic Review, American Economic Association, vol. 104(4), pages 1120-1148, April.
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    Keywords

    corn ethanol; data envelopment analysis; economic efficiency decomposition; marketing efficiency; mergers; Crop Production/Industries; Marketing; Production Economics;

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